It's a micro-cap stock's dream come true: national exposure. Yesterday on Labor Day, JBI, Inc. (JBII.PK) for the first time hit the national spotlight after a powerfully positive news piece multiple times on Fox News, covering their partnership with Crayola, which I previously covered in this article. The Fox News segment can be viewed here, and the Fox News press release that followed can be read here.
As stated in my first article on JBII:
Media coverage of a company can often have a dramatic effect on stock prices, especially for micro-caps. JBII already has a history of some positive media coverage (which sometimes sent the stock up hundreds of percent). If and when JBII achieves cash flow positive, perhaps it should be expected there will be more forthcoming and could have a stronger story being one of success rather than hope.
I then listed several examples of local, Canadian, and radio exposure, but JBII had yet to hit the true national scene until now. Is this the beginning of exposure that will snowball further? When it comes to green energy companies, positive exposure by the media can be a game-changer. The more the public rallies behind what they do, the higher their fuel could sell for, the cheaper their feedstock could be, the more government assistance it could get (in the form of grants or loans), and the better the terms of financing. Image is everything.
In the segment, Fox News mentions that JBII can "turn dried up markers into clean fuel capable of being used in boilers, ships and even your car." JBII turns Crayola used markers and waste rejects from its factories into fuel, mostly diesel that it then sells to companies such as US Steel (NYSE:X). Crayola's goal is to have 70 million markers recycled by the end of the year.
JBII has developed a patent-pending process called "Plastic2Oil" (or P2O) that takes unsorted, unwashed waste plastic and turns it into consumer-ready in-spec fuel. Its process utilizes a proprietary trade secret catalyst to crack the long hydrocarbon chains in plastic similar to the way oil refineries crack long hydrocarbon chains in oil. The process runs on its own off-gas and is mostly automated leaving very little labor and energy costs to run.
The timing of this media exposure is interesting and suggests it maybe it feels it's ready for prime time. In just the last three weeks it has gotten itself a new hot shot CEO Richard Heddle (founder and president of Heddle Marine Services), debt financing (a first) of up to $10 million (still pending), and its flagship P2O third-generation processor ran for 30 days before intentionally being cooled down for inspection, a first from what I can find in pyrolysis history (and up to 10 times longer than previous generations of the machine were thought to be able to run). After inspection and a few tweaks it was back up in running in no time (6 times) for round 2 at a much faster rate.
National coverage, new management, favorable financing terms, and fantastic production suggests JBII may be ready for the big leagues and ready to reward shareholders.
Still, JBI faces risks and uncertainties. For one, it has a history of net loss and delays and as with any new technology there's always a risk that something can go wrong especially in the short term until it has a number of solid quarters of profitable operations under its belt. Permits are always a challenge and take time and money. Fuel prices themselves could take a dive and would severely hurt JBI's chances of being successful. Keep in mind in 2008 when fuel prices hit record levels that same very year oil fell to under $30 per barrel. Who's to say that won't happen again? If it does, it would have a dramatically negative effect on JBI's bottom line.
Now that JBII has advanced to continuous operations, they need to be able to find additional, substantial cheap sources of reliable feedstock. Other companies such as KiOR (NASDAQ:KIOR) are attempting to enter the plastic-to-fuel industry. If other technologies are successful such as KIOR, JBII would compete for the feedstock supply with these companies. KIOR has had its own problems with achieving successful up time of production versus its expectations, something that could happen to JBII. If so, it could hurt JBII's ability to raise much needed funding. JBII has relied on funding for survival in the past and will continue to need more funding for growth even if it achieves cash-flow positive operations. JBII's technology is not yet patent protected as its patents are still pending. Failure to successfully get patents could allow more competitors to enter this space and/or make selling its machines too difficult to be successful. Furthermore JBII relies on trade secrets. If any of these secrets become known by JBII's competitors, it could compromise its ability to become successful.
Also, while JBII's production up time has been recently impressive, it's still very recent, and there can be no assurance that it will continue to operate reliably. JBII has struggled in the past to get its technology running reliably as unforeseen challenges came up throughout the year prior to the recent 30 day nonstop run. As I mentioned in my first article, one of the risks involved is permitting. JBII finally has all needed permits in place, but there was a cost and time delay in achieving them, having only successfully received the last necessary ones barely over 2 months ago. Any new, unexpected permit requirements could cost it new time and money, neither of which it can afford right now.
Finally, JBII had forecasted cash-flow positive results back in Q1 which it failed to achieve. Given this reality, investors would be smart to be cautious when relying on company forecasts as there are always risks, unknowns, and uncertainties that even the company itself may not be aware of. JBII has waded through many challenges in the past, including permitting, operational, and financial, but all of these challenges potentially remain to varying degrees going forward until JBII has proven itself further with hard, detailed and successful operational data.
Good luck to all JBII stakeholders.
Disclosure: I am long JBII.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.